The non-transparent LNG deal?

The non-transparent LNG deal? April 17, 2015 Documents available with Business Recorder reveal that the Cabinet Committee on Energy (CCoE) has approved a mechanism of direct payment for LNG imported from Qatar to Pakistan State Oil (PSO) by the Ministry of Finance from the subsidy payable to power sector. Three major conclusions can be drawn from this. First that the letter of credit was opened by the PSO, an entity that comes under the administrative control of the Ministry of Petroleum and Natural Resources, and not by any private sector entity including the CNG sector and the fertilizer sector. Secondly, PSO and its parent ministry would therefore naturally be engaged in negotiating a price for LNG import with Qatar. And finally, subsequent to the arrival of one LNG shipment to Pakistan to maintain that the price of LNG has not yet been agreed between the governments of Qatar and Pakistan defies belief. Brotherly relations aside, no government is going to send one consignment to another country valued at millions of dollars, without first reaching an agreement on price. Be that as it may, the following is the pricing formula approved by CCoE for the LNG import: (i) LNG price DES; (ii) PSO margin; (iii) terminal charges; (iv) SSGCL administrative margin for LSA; (v) SSGC cost of service and or transportation charges; and (vi) transmission and distribution losses. However, the exact amount to be charged under each head is not available and as such neither the per unit import price of the commodity nor any other prices under items (ii) to (vi) above have been released to the public. The allocation of the imported gas has also come under severe criticism. Shahid Khaqan Abbasi publicly stated that the CNG and fertilizer sectors would benefit from the first consignment but later the CNG sector was ignored (much to the chagrin of the sector claiming that each station had set aside major finances to procure LNG from the first consignment). The fertilizer sector was considered to be the main beneficiary of the first consignment but that policy too was revised and eventually the entire LNG cargo was dispatched to one company namely: Pak-Arab Fertilizer. One would have assumed that given the massive continuing energy shortfall the government would have preferred allocating LNG to those sectors that use it as a fuel notably the power sector whereas the fertilizer sector uses LNG as raw material. That too has inexplicably not happened and no clarification has been forthcoming with confusion fuelling accusations of massive kickbacks. What is extremely unfortunate is that the incumbent government has been taking several economic decisions with millions of dollars of the taxpayers' money involved that are simply not transparent. Shahid Khaqan Abbasi has stated on the electronic media that the government is considering amending the public procurement rules that would facilitate the agreement on LNG imports. This no doubt must have further raised the hackles of analysts and civil society alike given the fact that already the government has been agreeing to commercial deals that are violative of the PPRA rules by citing national interest. Disturbingly, the Prime Minister has stood by the flawed non-transparent decisions taken by his cabinet members - (for example, the Nandipur project and import of substandard wheat from Ukraine and Russia with large wheat stocks held in our godowns) and non-transparent alike - because of the rather strange logic that firing any cabinet member for lack of performance would weaken his government. This approach belies his earlier stance that he would constantly review the performance of each minister and minister of state and those found wanting would be fired. One can only hope that the Prime Minister takes cognizance of the performance of his cabinet colleagues and takes appropriate measures when found wanting. ================== Energy deal: Moscow to lend $2b for LNG pipeline By Zafar Bhutta Published: April 18, 2015 Petroleum minister says Russia will start its first LNG exports in 2016 and has also offered to sell gas to Pakistan. PHOTO: FILE ISLAMABAD: Pakistan and Russia have finalised an agreement under which Moscow will lend Islamabad $2 billion to lay a pipeline that will transport liquefied natural gas (LNG) from Karachi to Lahore, Petroleum Minister Shahid Khaqan Abbasi says, adding that in return Russian companies will be awarded the contract to build the pipeline. The formal agreement between the two sides is expected to be signed next month, following which Pakistan will also sign a commercial agreement with a Russian firm that Moscow will identify as its preferred contractor to build the 1,100-kilometre pipeline. According to the agreement, the contract will be awarded without any formal bidding process. The financing for the LNG pipeline comes as a prelude to Russia’s offer to sell LNG to Pakistan. Russia is the second-largest producer of natural gas in the world, and is seeking to diversify its export markets after a spat last year with the European Union, its main buyer, over Ukraine. “Pakistan and Russia have finalised an LNG pipeline deal in a recent meeting in Moscow and the two countries will sign a government-to-government basis deal next month,” Petroleum Minister Abbasi told The Express Tribune. “Russia will start its first LNG exports in 2016 and has also offered to sell gas to Pakistan.” This is not Islamabad’s first major cooperation agreement with Moscow over infrastructure. The former Soviet Union had financed the construction of the state-owned Pakistan Steel Mills under a similar arrangement. The Soviets had also helped supply some of the oil drilling equipment for the state-owned Oil and Gas Development Company. Some of that equipment is in use till date. Currently, Pakistan is working on two pipelines to transport re-gassified LNG from Karachi to the northern parts of the country. The first is a pipeline that will connect the Gwadar Port to the main natural gas pipeline hub in Nawabshah. The second will lay a direct pipeline from Karachi to Lahore. The government has signed an initial deal with China to award a $3 billion LNG terminal and pipeline project to a Chinese contractor in a similar financing-for-guaranteed-contract arrangement. Islamabad had initially offered Moscow and Beijing a similar arrangement for the Iran-Pakistan pipeline, but American and European sanctions against Tehran scuttled that project – at least for now. An LNG import terminal, owned and operated by the Engro Corporation, an industrial conglomerate, is already up and running, though there is, as yet, no agreement to import natural gas from Qatar, the third-largest natural gas producer in the world and closest to Pakistan. There is also no infrastructure yet that would allow that natural gas to be transported upcountry. “We are negotiating an LNG supply deal with Qatar which will be finalised soon,” Abbasi said. Pakistan’s existing pipeline network has the capacity to transport 320 million cubic feet of gas per day (mmcfd) in re-gassified LNG. Consumption in Punjab and Khyber-Pakhtunkhwa, as well as upper Sindh, however, exceeds 3,000 mmcfd, which is why the new pipelines are badly needed. In order to finance the payback of the loans needed to construct the pipelines, the Oil and Gas Regulatory Authority (Ogra) has allowed the state-owned gas utilities, Sui Northern Gas Pipelines (SNGP) and Sui Southern Gas Company (SSGC), to start charging consumers more for their gas bills every month. SNGP and SSGC are expected to invest $750 million and $300 million respectively to finance the LNG pipeline. Published in The Express Tribune, April 18th, 2015. ========================== California gas pipeline explosion, fire injure up to 15 people Sat, Apr 18 14:26 PM EDT image By Sharon Bernstein SACRAMENTO, Calif. (Reuters) - A construction crew on Friday accidentally ruptured a natural gas transmission line in Fresno, California, sparking an explosion and fire that injured up to 15 people, four of them critically, officials said. The 12-inch (30-cm) pipeline, belonging to Pacific Gas & Electric Corp (PCG.N), was struck by a backhoe near state Highway 99, unleashing a fireball that injured members of the construction team and a jail inmate crew nearby, Fresno Fire Department spokesman Peter Martinez said. The accident forced closure of the highway in both directions, along with an adjacent railroad line, Martinez said. Rail traffic was halted to check for possible damage to a railway bridge over a river, he said. One worker in critical condition was flown to hospital by helicopter, and 13 or 14 others were taken to hospitals for evaluation and treatment of injuries after the pipeline was ruptured at about 2:30 p.m., Martinez added. Four of the injured were taken to Community Regional Medical Center in Fresno, and two more were taken to the burn unit there, said hospital spokeswoman Mary Lisa Russell, adding that four were in critical condition and two serious. The utility had shut off the gas flow by 3:20 p.m., with the residual amount in the pipeline burning off just before 4 p.m., said PG&E spokesman Donald Cutler. A county public works equipment operator struck the natural gas line, said The Fresno Bee, citing Fresno County Administrative Officer John Navarrette. The employee, who was badly burned, was the patient airlifted to Community Regional Medical Center, the paper said, citing Navarrette. Inmates on a work detail were among the injured, it added, citing Sheriff Margaret Mims. The accident occurred at a shooting range used by law enforcement, the Fresno County Sheriff's Department told the newspaper. Fresno is about 190 miles (300 km) southeast of San Francisco. The California Public Utilities Commission sent a team to Fresno to investigate the explosion, spokeswoman Terrie Prosper said. "The CPUC will conduct a full investigation of the explosion and has already coordinated with the federal Pipeline and Hazardous Materials Safety Administration," Prosper said. A PG&E representative said the utility was also investigating. (Additional reporting by Steve Gorman in Los Angeles and Rory Carroll in San Francisco; Editing by Eric Beech, Sandra Maler and Clarence Fernandez) ======================= SPE Webinar Jan 2014 While remote parts of the world are awash with hundreds of trillions of cubic feet (Tcf) of natural gas, the industrialized West and emerging economies of the East cannot get enough of the clean-burning, environmentally friendly fuel. 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This paper will provide an overview of LNG liquefaction facilities, from inlet gas receiving to LNG storage and loading. However, the focus is on the liquefaction process and equipment. Differences among the commercially available liquefaction processes (cascade, single mixed refrigerant, propane-pre-cooled mixed refrigerant, double mixed refrigerant, nitrogen, etc.) will be discussed. The aim is to provide SPE members with a clear understanding of the technologies, equipment and process choices required for a successful LNG project. ================ For further info: Contact: SAQLAIN92110@YAHOO>COM